Northern Miner articleThe Northern Miner, 6/8/2007
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Silverstone piling on silver streams
Vancouver - Silverstone Resources (SST-V) is scooping up more silver by-product streams, the latest an agreement to buy 100% of the life-of-mine payable silver production from Lundin Mining’s (LUN-T) Neves-Corvo and Aljustrel mines in Portugal.
Neves-Corvos and Aljustrel are both base metal mines. The Neves-Corvo mill produces roughly 500,000 oz. payable silver annually contained in copper concentrate. The mill also produces zinc concentrate. Aljustrel is scheduled to start commissioning in September 2007 and reach full production in 2009, at which point it is expected to process 1.8 million tonnes of lead-zinc-silver ore annually, for a yield of 1.2 million oz. silver in lead concentrate per year.
“This deal will increase our silver production to 1 million oz. in 2007, 1.6 million oz. in 2008, 2.9 million oz. in 2009, and by the end of 2010 to 3.1 million oz.,” said Silverstone’s president and CEO Darren Pylot. “At these production levels Silverstone will be generating substantial amounts of free cash flow.”
The Lundin agreement has Silverstone paying out US$42.5 million in cash, 15.4 million common shares, and 4.3 million special warrants, which are convertible to common shares at no extra consideration. Silverstone will then pay a per-ounce price of the lesser of US$3.90 or the spot market price per oz. silver.
To finance the US$42.5 million cash payment Silverstone has arranged US$40 million in bank debt through Scotia Capital.
Silverstone only just closed its last silver buy-out in early April when the company finalized an agreement to purchase all silver produced by Capstone Mining’s (CS-T) Cozamin mine in Mexico for ten years. Pylot was excited about the pair of agreements. “We’re happy to have acquired these silver streams, especially with proven mine operators as partners, and we think this strengthens Silverstone’s growth potential considerably,” he said.
Capstone and Lundin are natural partners for the company, as each already holds significant shares in Silverstone. Capstone holds 15.8% of Silverstone’s common shares, while Lundin hold 19.5%. Both companies also hold special warrants that, if exercised, would increase Capstone’s ownership to 24.6% and Lundin’s to 20.9%.
But according to Pylot, Silverstone is planning to add to its list of silver by-product partners. “We plan to keep aggressively acquiring silver streams,” he said. “We have had interest from other base metals mines that we are looking into. We plan to acquire perhaps on the basis of one stream per quarter, if we can do that.”
Silverstone has an option to earn a 90% interest in four silver-gold properties in Mexico, all past producing mines. The company is aggressively exploring one of those projects and plans to release a resource estimate by the end of the year.